Hawaii project in an area with least demand. DHI offers $2000 discounts on the purchase of homes in this area to military personnel. Lowest price of homes are $425.000. If you finance this home with 20% downpayment, you mortgage payment with taxes, and insurance is about $2,500 monthly. There are five homes for rent (today's newspaper) at average of $2000 monthly. Some are military own on deployment. The average yearly net rent is $20,000 considering vacancy, real estate management fees, gross excise tax and fees. The $20,000 is optimistic amount. Considering the $30,000 payments less the $20,000 rental rates, the loss on this home is $10,000 yearly. Base on the info above, the value of DHI home in this area is $245,000; $180,000 less than the current asking price of the lowest price home in this area. If this is typical throughout DHI markets, the price of this stock should be between $8.00 to $12.00. Expect DHI to be on the lower end by December. No position on DHI, but I'm short CTX, & KBH.
Why DHI? I follow many home builders. DHI is a $15 stock. Not much more to fall. DHI started with $4 million cash on the books end of June. Current liabilities are huge compared to cash on hands. I believe DHI will sell millions of its shares to stay afloat. Borrowing is out; unlikely any bank would extend further credits. Homebuilders are toxic. My guess is that DHI will probably declare bankruptcy within the next three months. If DHI declares bankruptcy, it will affect all homebuilders. We will see.
Oh Boy you are short KBH and CTX yet spend your time talking down DHI .
Please , please ,please short the rest of the home builders also so the inevitable rally will squeeze you like a tube of Colgate.
No doubt the HB's may have further to fall but just bear in mind that if the average house price in the USA is as widely reported 220K$ approx. that make it less tha 50 % of what it is in places like the UK , Ireland or most of western Europe , so I believe there is HUGE upside in most of the HB's once the mortgages mess is resolved and normality returns to the US market . The problem was not the cost of the homes it was the packaging of the CDO etc that caused tghi mess . IMHO
Over 30 years in the real estate business. Do yourself a favor. Pick a typical homebuilder project and find out the lowest price home for sale. Check your newspaper to determine the average rent for the project. You will find the home as an ivestment will give a negative cash flow. When you are able to purchase a unit where the total expense ie cost of downpayment, mortgage, ins. taxes, and management fees are equal to the gross rent, you are in positive cash flow after income taxes and have a good investment. Rent vs purchase is determined the same way. This method of evaluating real estate is conservative but works well. Other methods take appreciating into consideration. Cash flow, and projected cash flow is best.